tailieunhanh - Ebook Accounting for fixed assets (2nd edition): Part 2

(BQ) Part 2 book "Accounting for fixed assets" has contents: Establishing value, allocation of costs to accounting periods, regulated utilities, government accounting, not for profit accounting, creation and verification of property records, computer programs. | 7 Establishing Value INTRODUCTION Considerable discussion has occurred recently on the subject of valuing property, plant, and equipment. There has been confusion as to the result of this discussion. Much of the confusion comes about as a result of the many different procedures there are for the valuation of property, plant, and equipment and the reasons for each. The purpose that the value is to be used for requires a different methodology for arriving at value. Generally accepted accounting principles require that the book value of an asset appears on the balance sheet; but there are many different values for the same object. Following are examples of these different values. • Historical cost—the book value as GAAP defines it • Original cost—the purchase price of the item • Replacement cost new or insurance value—the cost to purchase the same capability today • Current market value—the amount a willing buyer will pay for it today • Fair market value—the price that would be paid for the item in a condemnation proceeding • Assessed value—the basis on which it will be taxed 83 Establishing Value 84 HISTORICAL COST Each of the many values will be different. The reason, of course, is they have different purposes and, therefore, different procedures for establishing them. These values must be determined with care and deliberation. Historical cost, or book value, is the cost of purchasing and putting an object into use. How to ascertain book value is outlined in Chapter 2. Most of this book covers the procedures that must be followed to ensure that historical cost meets the principles outlined. Historical land value, once established, rarely changes and then only because of specific occurrences. Events that will change historical land value are limited to: Adding an item of significant value. Extraordinary modifications or repairs that increase the value, extend the life, or increase the capability of the asset. Impairment by catastrophe. Sale for less than land .